What's New At Credit Matters?

Welcome to our August newsletter. The focus this month puts forward thoughts on a number of issues.

The Special Topic is about directors being fined in the Perth Magistrates Court for not registering and obtaining a director’s ID.

Please note, apologies for a lack of June and July newsletters which occurred for a number of unforeseen circumstances.

Kim is available to help with your questions and concerns if you need any assistance, and as always, the first chat is always free of charge or obligation.

Quote Of The Month

“Bad times have a scientific value. These are the occasions a good learner would not miss. By Ralph Waldo Emerson.

Monthly Business Observation

A mistake in business can be fatal for the business and lead to serious loss. If the mistake is not fatal however, it can be a great opportunity to learn to manage their business(s) better.

There are two times when mistakes are made to try and enhance current sales and balance sheet figures for the personal gain of salespeople and managers. Unfortunately, these actions often indicate bad times are ahead for future operating periods. These are:

• at month end when management and salespeople force sales through in the current month, that are not required until the next month, and/or do not process credit claims and hold them over until the next month,
• creating false sales figures, or not processing credit claims until the next financial year, or inflating asset figures such as goodwill to make the business look more valuable, etc.

The mistake of inflating figures for a current financial period as described above, is that you are failing to produce the correct figures for the current period to protect individual needs at the expense of the business’s needs. The fact is that when these actions are undertaken, you are sabotaging the potential good results for both the individuals involved and the business’s needs in the future.

You may also find that your customers react negatively for sales being forced through a month earlier than required. After all, a business focused on operating cleanly and without mistakes which may complicate their operations, do not appreciate such situations.

Too often, it is found that by putting off the bad news for the current financial period in the hope of protecting the individual needs of people in the current period, rarely works in the long run. There is always a price to pay. Historically, it has been found that usually the price of dishonesty in the long term is always harsher than short-term honesty.

Unfortunately, this lesson and the continuation of these types of mistakes in the past which affect the business negatively in the future is rarely learnt.

This Month's Business Inconvenient Truth

The true value of your Debtors Ledger is always measured by the number of invoices which will be paid within, or shortly after their respective due, or after resolution of any problems.

Unfortunately, all invoices which are unpaid or subject to unresolved problems, mistakes which have been identified but not yet not rectified, or raised without being approved by the customer, or delivered to the incorrect address, are nothing more than unprocessed liabilities.

The effect of the above unresolved invoices, will result in many negative and unnecessary and costly expenses to your business. The perfect example is illustrated in the following paragraph.

Recently, an opportunity to buy a business was discontinued when the prospective buyer found that the accounts figures were “materially misstated.” The reference to this article is, “Doctors owed millions in eReports collapse” by Max Mason in the AFR 21/5/2024.

What this situation also reveals apart from shoddy business practices, is another aspect of business which I have also written about in the past. There are no secrets in business anymore. In this case, the figures on the value in the Debtors Ledger were discovered to be seriously out of order, and the truth was exposed for all to see.